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Establish Futures Market to Promote the Market-based Reform of China's Natural Gas Price(No. 27, 2017)


By Guo Jiaofeng, Gao Shiji, Cai Shenghua, Bai Yanfeng & Ling Yun, Research Team on “Natural Gas Coordinated Development Strategy for Beijing-Tianjin-Hebei Region”, Research Institute of Resources and Environment Policies, DRC

Research Report No. 27, 2017 (Total 5102) 2017-3-1

Abstract: Improving the natural gas pricing system is one of the major tasks of market-based reform targeting the fulfillment of the 13th Five-Year Plan and the realization of the mid-to-long-term development plan of natural gas in China. Futures market transactions follow the principles of openness, fairness and impartiality. Through market transactions and effective competition between buyers and sellers in the futures market, a benchmark price that can fully and truly reflect the market supply-demand balance could be formed, serving as a key driver to promote natural gas market reform. At present, Asian countries are vying for the place to play the role of a natural gas pricing center. Against such a landscape, it is urgent for China to establish a futures-market-based natural gas pricing system that can make supply better correspond to demand. It is suggested that the government establish the liquefied natural gas (LNG) futures market in eastern China for bulk trading. On the basis of that, the government needs to promote the construction of inland gas storage, enhance the process to make the projects of heat pipelines and power grid become accessible to the third party and transfer natural gas metering and pricing to calorific value metering and pricing so as to obtain the pricing center position in Asia-Pacific region. By so doing is China hoped to form a supply-demand-based pricing mechanism to guide production, consumption and trading and optimize the allocation of resources.

Key words: natural gas futures market, natural gas benchmark price, natural gas pricing center